World Economy

British Business Confidence Plunges Drastically

Barely 20% of the IoD members are optimistic about the UK economy.Barely 20% of the IoD members are optimistic about the UK economy.

Business confidence in Britain dropped dramatically days ahead of Brexit talks on concerns about political and economic uncertainties after British Prime Minister Theresa May lost parliamentary majority, a survey showed late Monday.

According to the Institute of Directors, a British business organization, 92% of its nearly 700 members believe that uncertainty over the makeup of the new government is a concern for the British economy, with 65% describing the concern as “significant” and 27% as “slight”, Xinhua reported.

May called an early election in April when opinion polls suggested she was set for a sweeping win which would give her a strong mandate to start Brexit talks with the European Union.

However, the snap election held on Thursday has resulted in a hung parliament after the Conservative Party led by May lost its majority in the House of Commons.

“It is hard to overstate what a dramatic impact the current political uncertainty is having on business leaders, and the consequences could—if not addressed immediately—be disastrous for the UK economy,” said Stephen Martin, director general of the IoD.

The survey, conducted since noon on Friday, showed that only 20% of the IoD members are optimistic about the UK economy over the next 12 months, while some 57% are either quite or very pessimistic.

Compared with the latest figures, the IoD’s previous survey in May showed 34% of its members registered optimism about the economy, while only 37% reported pessimism.

The overall priority for the new government, according to IoD members, must be reaching a new trade deal with the European Union.

On the domestic front, work to deliver a higher skilled workforce and better quality infrastructure is considered vitally important.

“The last thing business leaders need is a parliament in paralysis, and the consequences for British businesses and for the UK as an investment destination would be severe,” Martin said.

However, there is “little appetite for a further election” this year, as business leaders are keener to see the new government get to work in Brussels and on the domestic front, Martin noted.

Meanwhile, British households are under tremendous pressure as inflation picked up again to hit 2.9% last month, its highest rate in four years, as the weak pound pushes up the price of imports.

That is an increase from 2.7% in the 12 months to April, and means prices are soaring even as wage growth slows down—regular pay is only thought to have risen by 2% in the year to April.

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